I have in previous articles looked at the matter of debt management extensively, so today I will address the subject of borrowing against your investments.

It’s highly recommended that you clear all debts before retirement as it’s much harder for retirees to manage debts after ceasing from active full-time work.

Mortgages are the only debts that retirees should carry into their retirement.

Several studies conducted in the USA showed that an increasing number of American seniors are retiring with debts. Unfortunately in Jamaica, I am yet to find any data that provides information regarding household debts held by seniors or retirees. Nevertheless, based on my experience, there is a notable number of seniors or retirees who are repaying debts in retirement or applying for loans to meet important needs. The types of debts include mortgages, motor vehicles loans, education (for adult children), credit cards, and personal loans.

According to a retiree with whom I met last week, it became extremely difficult to maintain her credit card payments. This was compounded by the fact that she has several credit cards. She was disappointed that several financial institutions had rejected her request to convert her credit card debts into a personal loan. However, she praised the help of BPM Financial Limited in offering her a loan against her investment. She was able to clear her credit card indebtedness, while her investment continued to grow at compound interest.

This retiree had re-entered the workforce because her pension is only $30,000 monthly. I queried the length of time that she had contributed to a pension plan. She made contributions for 12 consecutive years in her last job. Having changed jobs before, her pension contribution refunds were invested in her children’s tertiary education. Currently, only one of her two children is employed. This retiree provides financial assistance for her unemployed child who is furthering her education. Despite regretting the late start of her investment journey, she is grateful for the opportunity her investment provides in managing her debt repayment. In applying for a loan against her investment, there were no credit checks. Funds were disbursed quickly at a low interest rate and minimum cost, while her investment continued to grow undisturbed at compound interest.

Another retiree, who also re-entered the workforce, was happy that she started her investment journey prior to retirement. Unexpected expenses can happen at any time and she understands now more than ever the value of investing long-term and the benefit her investment provides as security for a hassle-free loan should the occasion arise. Just as she did during decades of working, she has established a salary deduction process with her employers for monthly deductions to her investment. She is happy that her years of training, expertise, and professional qualifications have given her a second chance to make a meaningful contribution to society.

A loan against your investment provides numerous benefits versus other loans. There are several factors lenders consider when seniors or retirees seek a loan. Age can be a barrier to getting a loan. Income is a significant consideration, as it will determine how much can be borrowed and the ability to repay. It’s even harder for a retiree, who may be receiving a reduced income. The lender will assess your assets. A secured loan may be the best option as the lender will seek to repossess your assets should you default on payments.

Obtaining a loan against your investment portfolio is far better than risking your home as security. In retirement it is not uncommon for some retirees to accumulate huge medical bills, therefore a healthy investment portfolio can save the day by being your lifeline at a time of great need. It can save the investor much stress and anxiety and provide dignity and respect during the retirement years. In borrowing against an investment portfolio, should the client fail to make good on their payments, the deductions can be made from the investment account. The investor benefits in meeting the particular purpose of the loan and being debt-free. If the loan is in good standing and paid off promptly without interrupting the investment, the retiree can live comfortably knowing that the investment is intact.

I encourage all working adults to start investing early. Keep adding to your investments and in retirement reap the rewards. Make a budget and stick to it as retirement can be burdensome. But an investment portfolio should be every retiree’s safety net and lifelong friend.

Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at: gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self and at: livingaboveself@gmail.com